The crypto lending platform has signed a term sheet with FTX to secure a $250 million revolving credit facility.
Key Takeaways
BlockFi has secured a $250 million credit facility from crypto exchange FTX.
BlockFi CEO Zac Prince said that the agreement would “unlock future collaboration and innovation between BlockFi and FTX.”
The new credit facility may help alleviate fears that BlockFi is facing a liquidity crisis.
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BlockFi CEO Zac Prince said the loan would bolster the firm’s balance sheet and platform strength.
BlockFi Accepts Credit From FTX
BlockFi has partnered with FTX for a new line of credit.
CEO Zac Prince announced in a Tuesday Twitter thread that BlockFi had secured a $250 million credit facility from crypto exchange FTX. The deal, which Prince said would bolster the firm’s balance sheet and platform strength, provides BlockFi with a $250 million umbrella loan.
While the details of the deal have not been made public, credit facilities like this often give the companies receiving them greater flexibility over the amount of debt taken on and the repayment time frame compared to other lending agreements. Prince added that the agreement would also “unlock future collaboration and innovation between BlockFi and FTX,” alluding to a closer working relationship between the two firms going forward.
Early last week, BlockFi announced it would cut 20% of its workforce, raising questions over the firm’s finances. More recently, a report from the Financial Times revealed the firm had liquidated a loan made out to prominent crypto hedge fund Three Arrows Capital. Despite assuring onlookers that no client funds had been impacted by the Three Arrows default, rumors that BlockFi was dealing with a liquidity crisis have continued circulating online. Many fear that the firm is in a similar position to rival lending platform Celsius, which reportedly does not hold enough liquid assets to pay out its depositors.
Unconfirmed reports of a leaked BlockFi balance sheet also indicate the firm may be struggling financially. The leaked financial statement indicates that BlockFi has lost more than $285 million over the past two years and currently only holds enough liquid assets to pay back a tiny fraction of its total depositors’ funds. If true, such rumors would also help explain why the firm is having trouble attracting investment in its latest funding round, despite slashing its valuation from the $3 billion it achieved in March last year to $1 billion today.
After exploring other funding avenues, BlockFi may have finally found a lender willing to help it weather the current market decline. In a recent interview with NPR, FTX CEO Sam Bankman-Fried said he believed his company had a “responsibility” to bail out crypto companies in times of crisis. With the new $250 million cash injection, BlockFi could be the first company to benefit from Bankman-Fried’s new altruistic policy.
Disclosure: At the time of writing this piece, the author owned ETH, FTT, and several other cryptocurrencies.
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